IBM shares saw a boost after Goldman Sachs analysts gave the tech giant a “buy” rating, citing their positive moves towards long-term growth and investments in artificial intelligence (AI). The analysts highlighted IBM’s progress in infrastructure software, AI, and consulting, emphasizing that the company could potentially gain market share as its AI investments pay off.
Goldman Sachs analysts pointed out that IBM is in the process of shifting its portfolio towards modernized infrastructure and applications software, as well as a broader range of services, while moving away from a legacy-focused business model. They specifically noted that IBM’s organic investments in AI offerings, such as WatsonX, have started to yield positive results. The analysts believe that IBM’s integrated software and services offerings, along with their use of open source LLM, provide a competitive edge and can lead to continued appreciation of the stock.
In terms of financial performance, the analysts anticipate that IBM will maintain revenue growth between 5% and 7% over the long term, with around 10% growth in free cash flow. They mentioned that IBM’s improved software business mix and consistent financial performance could contribute to the stock’s appreciation. As a result, Goldman Sachs gave IBM a target price of $200, which is 14% above the closing price on Monday.
IBM closed 1.5% higher at $175.01 on Monday and has gained approximately 7% year-to-date in 2024. The analysts remain optimistic about IBM’s potential for growth and market share expansion, especially as their AI investments continue to deliver positive outcomes. Overall, Goldman Sachs believes that IBM is on track to successfully complete its pivot towards long-term growth, positioning the company for continued success in the future.
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